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Alcohol, tobacco industry players drag govt to court

Business

Mohloai Mpesi

The Lesotho Liquor and Restaurant Owners Association (LLROA) has approached the High Court to challenge the Tobacco and Alcoholic Products Levy Act of 2022.

This comes shortly after LLROA along with other stakeholders including the Lesotho Chamber of Commerce and Industry (LCCI) and the Southern African Alcohol Policy Alliance (SAAPA) teamed up to petition the government to withdraw the act.

The group appeared before the national assembly’s economic and Development Cluster.

Following their failed endeavour to convince the ministry of finance and development planning and the Revenue Services Lesotho (RSL) to withdraw the Act last week, the association has gone to the High Court with hat in hand to seek intervention.

In court papers, the association complained that the increased levy rates in respect of Alcoholic products and Tobacco, 15 percent and 30 percent respectively, were imposed unlawfully and irrationally.

The act became effective in January 2023 but was used in around or the middle of April 2023.

The squabble before the authority and the industry comes a long way since the ministry along with RSL said they would increase the levy in 2020 before the same Cluster.

The ministry when motivating the bill before the cluster indicated that they projected an annual revenue from the products amassing approximately M200million while the levy will also aid to suppress the consumption of the two products, thus reducing the illnesses emanating from abuse of products.

In a different perspective, industry had always been its stand point to barricade the levy on the grounds that the levy will kill their businesses as well as buttress the surge in product smuggling from the neighbouring South Africa as was the case during Covid-19 lockdowns.       

In the court application filed on Wednesday this week, the association lamented that there were never prior consultations before the enactment of the levy and consequently their businesses continue to suffer irreparable harm due to the imposed draconian law.

The first applicants are LLROA, while the respondents are the minister of finance, principals secretary of the ministry of finance, attorney general, and RSL.

“The Lesotho government has acted unlawfully and irrationally when implementing the payment of tobacco and Alcoholic products levy under tobacco and alcoholic products Levy Act 2023.

“Applicant and its member are suffering continuing prejudice as the unreasonable and unjustifiable act of government is continuing and the businesses are on a downward spiral towards bankruptcy and closure,” the court application reads.

“The harm that the applicant and its members stand to suffer is irreparable in as much as the public consumers are suffering. The public interest requires speedy resolution of the impasse that affects all the people in the tobacco and alcoholic products sector,” the application continues.

The applicant in the matter pray that the implementation of levies on alcohol and tobacco products be suspended until such time that there is law or regulations in place to regulate the administration of the levies.

“The decision of the government to increase or fix the levy payable on alcoholic and tobacco products at 15% and 30% respectively in terms of the Tobacco and Alcohol Products Levy Act 2023 scheduled be reviewed, corrected and aside,” the application reads.

“That the Lesotho Government be ordered and directed to reconsider the imposition of the levy on a progressive basis not in the manner that it was done in terms of Tobacco and Alcohol Products Levy Act 2023 schedule,” the application reads.

LLROA complains that companies are faced with decision to shut down business, retrench employees, terminate sublease contract with landlords, manage expenditure and overheard.

According to LLROA President Motseki Nkeane’s grounds of review, the traders are currently selling the products at a high price and the receipts given to the consumers do not state how much money out of the one paid to the trader is the levy and how the levy is to be remitted.

“This has made the administration of the levies unlawful,” Nkeane said.      

He continued that: “It is clear on the face of it that alcohol has been bought at high price but there is no provision that shows the levy implementation as there is no law on how it should be implemented.

It is for this reason that the court should in the interim in the interim order that the imposition of levies be held in abeyance,” Nkeane said.    

He further indicated that the levies have made prices of alcoholic beverages and tobacco in Maseru and other nearing towns of South Africa to be between 50% plus to 100% more expensive than the same product in South Africa.

“The levies encourages ongoing smuggling of liquor into Lesotho such that licensed businesses are collapsing while smuggling trade flourishes and the porous borders of Lesotho are allowing the sale of smuggled goods.

“The goods come in through informal borders all over Lesotho especially in Berea, Leribe, Butha-Buthe, Mafeteng, Mohale’s Hoek and Quthing,” he continued.

Nkeane made comparison in his affidavit that a quarter of beer in Ladybrand costs M18.00 while the same quarter of beer in Maseru is bought for M30.

He said that has birthed a new behaviour and lifestyle from people who drink beer as they prefer to go and drink in Ladybrand and return when their thirst has been quenched.

“It is grossly unreasonable for the levies to have a direct shut down of businesses in Maseru,” he said.

To pour more to the fire, he said the practical effect in the illegal manner that the government imposes is that the Maluti Mountain Brewery is unable to have sales due to influx of illegal imports, as such, the people who stock at the Maluti Mountain Brewery are not able to trade.

“The forgoing calamity is forcing businesses to shut down and give way to smuggling to thrive,” he said.     

He said the LSR is receiving lesser tax than it would ordinarily get when unreasonable levies are not in place, while accountants no accounting and tax work with the reduced commercial activity by the levies.

“Landlords are starting to suffer as there is no payment for rent due to reduced economic activity while Basotho employees are running out of jobs as the businesses are closed down and security companies are losing jobs as the places they offer security to are diminishing with closure of liquor trading stores,” he said.

He said the decision of the minister become unjustifiable looked from almost all angles.

“It has bad economic repercussions for the country at large,” he said.              

  He continued that: “the ultimate suffer in the decision of the minister is an ordinary Mosotho consumer who is a client of the applicant. The applicant’s members are pushed into passing the financial burden tot eh consumer.”

“The drop in sales is very bad as provided for in the analysis. It clearly appears that the imposition of guarantees the closure of manufacturers when comparable periods of sales in 2022 are put side by side with the sale in 2023. The levies are irrational and unjustifiable in a free democratic society,” he said.        

Arguments concerning the urgency of the application will be heard today.

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